Friday's Jobs Data - Something to Consider
Last Friday's jobs data released by the Labor Department paints a picture of reasonable growth in employment, with new jobs reported at 295,000 exceeding the forecast of 240,000. Markets reacted of course, perhaps more violently than one might expect. The media celebrated, as one might expect, although this time around we found something different and unique being reported:
Consider the population of the U.S. in 1995 vs. today: 264 million vs. 319 million, about a 21% increase over the last 20 years. Looking at the current streak in this light might dampen the overwhelmingly positive reaction to this streak.
Let's turn now to the St Louis Fed's account of the number of people of working age in 1995: 198,584,000. Contrast this number with the working age population in 2012 (the last year - for some reason - the St Louis Fed tracked this number): 243,284,000.
While the percentage of the population of working age increased slightly from 1995 to 2015: 75% vs 76.1%. The percentage of working age Americans therefore increased roughly 22.5%, but let's just use the increase in population of 21%.
So considering first the fact that the number of working age Americans 7% more than the total population, comparing the absolute numbers of jobs added - 200,000+ - shouldn't necessarily cause us to celebrate as so many did last Friday. What might make us celebrate would be knowing that the number of jobs added averaged at least 22.5% higher over those 12 months. None of those numbers were presented. Unless that's been the case, then the comparison really doesn't pack the punch that the headlines would make out.
Add to this the fact that these numbers purportedly strengthen the case for the Fed to raise interest rates, the consideration of which drove stocks and bonds dramatically lower. These numbers also drove the dollar significantly higher, thereby pummeling gold, which lost over $30/oz on Friday alone.
Could these reactions turn out to be much ado about virtually nothing? Will what continues to be tepid growth motivate the Fed to actually raise interest rates in 2015?
Perhaps a better question would be: Have we grown tired of the Fed artificially holding rates down since 2008? Such a policy has caused gross distortions in virtually all markets fueled by speculators as well as those investors virtually "forced" to make a decision either to funnel their money into risky assets or continue to starve for income that a normal market would provide to them in reasonably less risky assets. Such a policy also fosters bad decisions by businesses able to access "cheap" borrowings which tempt them to borrow and spend on questionably profitable projects.
The economy has now added more than 200,000 jobs for 12 straight months, the longest such streak since 1995.On the face of it, this looks impressive. While we won't pour cold water on the basically upbeat nature of increasing employment, we do want to note something we haven't seen reported anywhere else.
Consider the population of the U.S. in 1995 vs. today: 264 million vs. 319 million, about a 21% increase over the last 20 years. Looking at the current streak in this light might dampen the overwhelmingly positive reaction to this streak.
Let's turn now to the St Louis Fed's account of the number of people of working age in 1995: 198,584,000. Contrast this number with the working age population in 2012 (the last year - for some reason - the St Louis Fed tracked this number): 243,284,000.
While the percentage of the population of working age increased slightly from 1995 to 2015: 75% vs 76.1%. The percentage of working age Americans therefore increased roughly 22.5%, but let's just use the increase in population of 21%.
So considering first the fact that the number of working age Americans 7% more than the total population, comparing the absolute numbers of jobs added - 200,000+ - shouldn't necessarily cause us to celebrate as so many did last Friday. What might make us celebrate would be knowing that the number of jobs added averaged at least 22.5% higher over those 12 months. None of those numbers were presented. Unless that's been the case, then the comparison really doesn't pack the punch that the headlines would make out.
Add to this the fact that these numbers purportedly strengthen the case for the Fed to raise interest rates, the consideration of which drove stocks and bonds dramatically lower. These numbers also drove the dollar significantly higher, thereby pummeling gold, which lost over $30/oz on Friday alone.
Could these reactions turn out to be much ado about virtually nothing? Will what continues to be tepid growth motivate the Fed to actually raise interest rates in 2015?
Perhaps a better question would be: Have we grown tired of the Fed artificially holding rates down since 2008? Such a policy has caused gross distortions in virtually all markets fueled by speculators as well as those investors virtually "forced" to make a decision either to funnel their money into risky assets or continue to starve for income that a normal market would provide to them in reasonably less risky assets. Such a policy also fosters bad decisions by businesses able to access "cheap" borrowings which tempt them to borrow and spend on questionably profitable projects.
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